“More Subprime and Non-QM Lenders are making their way into Residential Lending”

“More Subprime and Non-QM Lenders are making their way into Residential Lending”


Many of us in the mortgage broker world have been predicting for a long time that this will keep happening and why not, these lenders charge a higher rate and that is why they are willing to take more risk.


I am not surprised one bit. Most QM lending continues to be more restrictive so all the talk about lending guidelines and restrictions continue to get tougher, not the other way around. It is not one bit shocking that homeownership is at the lowest level in nearly 50 years.


It is often hard for me to recommend some of these types of loan products; rates are higher, much higher in many cases. I recently got a quote for a client where the rate was going to be 7.5% and the loan had a two year prepayment penalty. When I was asked what they should do, I recommended waiting 12 months, working on the credit and getting a much better loan at that time.


This is a bit extreme, as many of them will fall into rates in the 5% to 6% range with terms that are more acceptable and are a good option until we can refinance them out of this kind of loan. No matter what, while we wait to get out of it working on the issues is crucial.


At least there are options and there will be more of them, but also at higher rates.


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Joe Petrowsky, NMLS #6869

Right Trac Financial Group, Inc. NMLS #2709

110 Main St.

Manchester, Ct. 06042

Office: 860 647-7701 x116

Fax: 860 647-8940

Cell: 860 836-9294

Email: joe@righttracfg.com



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Joe Petrowsky does not guarantee nor is in any way responsible for the accuracy of the information provided herein, and provides said information without warranties of any kind, either expressed or implied.

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Comment balloon 20 commentsJoe Petrowsky • September 25 2015 10:54AM


Hi Joe.  There is a need for these products.  Not everybody falls into the nice neat package that conventional loans require.

Posted by Conrad Allen, Webster, Ma, Realtor (Re/Max Professional Associates) almost 5 years ago

Some potential buyers won't have a Joe to explain the risks to them!  Thanks for the useful post.

Posted by Kat Palmiotti, The House Kat (406-270-3667, kat@thehousekat.com, Broker, Blackstone Realty Group - brokered by eXp Realty) almost 5 years ago

It's tricky as not everyone can qualify for traditional types, and I guess it's good there are other options, but some seem like they've gone a bit too far.  In this case, it seems like it would be better to wait.

Posted by Debbie Gartner, The Flooring Girl & Blog Stylist -Dynamo Marketers (The Flooring Girl) almost 5 years ago

At least they are available at not unreasonable rates, Joe.  They are taking the risk, so it's a good way for them to make some rewards.

Posted by Gabe Sanders, Stuart Florida Real Estate (Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales) almost 5 years ago

Good morning Joe.  Even for me those interest rates seem to be excessive.  However having said that I wouldn't want to take the risk without some kind of better return on my money.   Catch 22  

Posted by James Dray, Exceptional Agents, Outstanding Results (Fathom Realty) almost 5 years ago

Joe, as they say history repeats itself and I would like to know who is buying these loans on the secondary market??

Posted by Ginny Gorman, Homes for Sale in Southern RI and beyond (RI Real Estate Services ~ 401-529-7849~ RI Waterfront Real Estate) almost 5 years ago

Good Morning Joe: Unless these lenders have extremely enormous and galactical resources, I will be having the same question as Ginny Gorman 's.

Posted by Maria Gilda Racelis, Home Ownership is w/in Reach. We Make it Happen! (Home Buyers Realty, LLC-Manchester, Bolton. Vernon,Ellington) almost 5 years ago

Good morning Joe,

Sounds more like loan sharks but not that low of interest rate. Two year prepayment penalty to make a few extra bucks.

Make yourself a great day.

Posted by Raymond E. Camp, Licensed Real Estate Salesperson Greater Rochester (Howard Hanna Real Estate Services) almost 5 years ago

Joe, sometimes people ae better off clearing up issues before they purchase! Enjoy your day!

Posted by Wayne Martin, Real Estate Broker - Retired (Wayne M Martin) almost 5 years ago

Good morning Joe Petrowsky,

It is nice to have products out there for those that don't fall into the traditional package as long as they understand the risks and the extra costs. Always better to pay less but for some they don't care and want instant gratification..their choice!

Posted by Dorie Dillard CRS GRI ABR, Serving Buyers & Sellers in NW Austin Real Estate (Coldwell Banker United Realtors® ~ 512.750.6899) almost 5 years ago

Joe , oh my. I hope I don't run into anyone using these products because when they get into trouble.... It is, in my humble estimation, predatory lending. Again. 

Posted by Andrea Swiedler, Realtor, Southern Litchfield County CT (Berkshire Hathaway HomeServices New England Properties) almost 5 years ago

Many families will readily accept a higher mortgage interest rate for an opportunity to purchase a home.

Posted by Roy Kelley (Realty Group Referrals) almost 5 years ago

As you say there are other options, and your the perfect one to suggest these...

Posted by Lawrence "Larry" & Sheila Agranoff. Cell: 631-805-4400, Long Island Home and Condo Specialists (The Top Team @ Charles Rutenberg Realty 255 Executive Dr, Plainview NY 11803) almost 5 years ago

Joe - I really home we don't have an increase in these.  I would hate to se 2008 all over again.

Posted by Grant Schneider, Your Coach Helping You Create Successful Outcomes (Performance Development Strategies) almost 5 years ago

Hi Joe Petrowsky The real question is "is that 7.5% loan better than waiting while prices "creep" up another 10%?" And they can still re-fi in two years if they listen to you about fixing their credit. It seems like a win-win.

Bill Roberts

Posted by Bill Roberts, "Baby Boomer" Retirement Planner (Brooks and Dunphy Real Estate) almost 5 years ago

Joe Petrowsky interesting that these loans are appearing again

Posted by Hannah Williams, Expertise NE Philadelphia & Bucks 215-953-8818 (Re/Max Eastern inc.) almost 5 years ago

Joe: Unfortunately many will get caught in this cycle and end up with bad loans as a result. As Kat pointed out, there aren't enough Joe's telling consumers to wait and get their finances in better shape.

Posted by Anita Clark, Realtor - Homes for Sale in Warner Robins GA (Coldwell Banker Access Realty ~ 478.960.8055) almost 5 years ago


If the market is there, the resources appear for those who need them.  It is important that those in need really educate themselves to the pros and cons as Bill Roberts expressed in his comment. A

Posted by Ron and Alexandra Seigel, Luxury Real Estate Branding, Marketing & Strategy (Napa Consultants) almost 5 years ago

Joe options are good, BUT when those options are used improperly as they were in the past, they create more harm than good.

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) almost 5 years ago


With the state of the correct mortgage market . . . . A home buyer needs the help of a professional lender to guild them through the mortgage process.

Good luck and success.

Lou Ludiwg

Posted by Lou Ludwig, Designations Earned CRB, CRS, CIPS, GRI, SRES, TRC (Ludwig & Associates) almost 5 years ago